Indian Retailers Hope for Better 2013

Indian retailers saw a fledgling recovery in sales toward the end of 2012, raising hopes of better fortunes in 2013.

Indian retailers saw a fledgling recovery in sales toward the end of 2012, raising hopes of better fortunes in 2013.

Sales were tepid for most of 2012 as local retailers felt the pinch of high inflation and slowing growth, which left consumers with less money in their pockets for shopping.

There was, however, a spike in sales in the October-December period — the festival quarter — when shoppers in India typically loosen their purse-strings.

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“Overall, sales in the October-December quarter have been positive. Going forward, things also look positive,” said B.S. Nagesh, vice chairman at Shoppers Stop Ltd., one of India’s biggest retailers.

Kishore Biyani, managing director of Pantaloon Retail (India) Ltd., added that sales on and around Christmas were “very good.”

Pantaloon Retail, India’s biggest retailer by market capitalization, runs stores under different formats selling everything from food to furniture and apparel to electronics.

The categories of food, fashion and consumer electronics have done particularly well, Mr. Biyani said, adding that same-store sales growth across the company’s various store formats likely rose to double-digits last quarter.

Same-store-sales growth is a key retail metric that captures sales performance at stores open for at least a year, removing the distortion from sales additions from new store openings.

Retailers in India usually record a jump in sales during the Hindu festival season, which starts around Dusshera, typically in October, and peaks with Diwali, 20 days later.

The festival season is considered auspicious for big-ticket investments, including homes, cars and jewelry. Shoppers also tend to concentrate their purchases of items like apparel, furniture, smartphones and home appliances at this time.

Ajit Joshi, chief executive of Infiniti Retail Ltd., said the company’s Croma multi-brand electronic stores took 1.10 billion rupees ($20 million) in sales during the five-day festival period of Diwali. Infiniti Retail is a unit of the Tata Group.

Mr. Joshi credited the strong performance to the launch of products like Apple Inc.'s latest iPhone5 smartphone and iPad Mini tablet Google Inc.'s Nexus 7 tablet, as well as some of Croma’s marketing initiatives.

Croma’s same-store sales growth in the three months through December is likely to have been “substantially” higher than the average 20% recorded in the rest of 2012, he said.

“Stock markets doing well and employees receiving their annual bonuses are factors that motivate people to come out and shop,” Mr. Joshi added.

India’s benchmark Sensex rose 26% in 2012 — making it one of the world’s top gainers — on the back of buying by foreign funds, attractive valuations, and the government opening the economy to more overseas investment.

In September, the government allowed more foreign investment in sectors such as retail, aviation and broadcasting. It also amended India’s banking law to encourage more investment in the sector.

Mr. Joshi said consumer sentiment and sales would get a further fillip once international companies like IKEA launch stores in India.

Online retailers in India also did well in the festive season.

“Overall, transactions have more than doubled as compared to last year’s festive shopping season,” said Abhimanyu Lal, head of category management at the India operations of eBay Inc.

But a cautious attitude still prevails, added Saloni Nangia, president of Technopak, a New Delhi consultancy.

“Even if there’s an improvement in sales in 2013 it’s going to be a gradual one,” she said.

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